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AIIB eyes inaugural US dollar bond as soon as this year

The China-led Asian Infrastructure Investment Bank said on Thursday it may issue its first bond in US dollars as early as this year.

PHOTO: REUTERS

[HONG KONG] The China-led Asian Infrastructure Investment Bank said on Thursday it may issue its first bond in US dollars as early as this year.

Soren Elbech, treasurer at the Beijing-based multilateral development bank, told IFR that it will be a benchmark bond but did not specify a maturity.

Moody's assigned the AIIB a first-time Aaa long-term foreign currency rating on Thursday with a stable outlook, citing expectations that AIIB's liquidity position will be as strong as other highly rated multilateral development banks.

Mr Elbech said the deal could come this year, but it would take some months before the AIIB was ready to debut the transaction, with time required for bond and swaps documentation, and AIIB's new head of funding joining the institution only in September.

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"At some stage later in the year, the market also becomes less interesting to engage with. It's likely, but it's equally likely it could be 2018," he said.

The AIIB is likely to issue bonds of a few billion dollars annually in the next few years, as it ramps up borrowing.

"We are going to be very, very similar in our capital markets approach to the other multilaterals," Mr Elbech said.

The AIIB has been viewed as a rival to the western-dominated World Bank and Asian Development Bank, which are both rated Triple A by all three international rating agencies.

The AIIB has subscribed capital of US$20 billion that will be fully paid by 2024, underscoring Moody's expectations that the AIIB's capital base will remain very large in relation to its assets over the next 10 years.

However Mr Elbech forecasts the paid-in capital to have largely been dispersed approximately five years from now, warranting the need to discover different sources of funding.

"And to not shock the market when we need to start borrowing, I want to start interacting with the market, build a yield curve, look at pricing references and get global investors used to the AIIB name, meet with them and have an opportunity to get them to ask all the questions they need to open their credit lines, put us in the right portfolios, position us alongside their peer group and gradually ramp up the borrowing programme until we have a borrowing need," Mr Elbech said.